Retail Sales Dive, Negative Revisions Too: GDP Impact 4th and 1st Qtr

Retail sales fell 0.3% vs expectations of a 0.3% gain. December's 0.4% gain was taken back entirely.

Economists had a major surprise today with retail sales. Let's check in with Econday to see what was predicted and what happened.

Econoday Prediction

Unit auto sales proved very weak which is expected to hold down January's retail sales gain to a moderate 0.3 percent. When excluding autos, however, sales are expected to show a seventh month of solid strength, at a consensus gain of 0.5 percent. When excluding autos and also gasoline, where higher prices are a positive for the month, sales are expected to move back down to a 0.3 percent gain. When also excluding food services and building materials, control group sales are also expected to come in at a 0.3 percent gain.

Result Highlights

Retail sales not only proved very soft in January, but a sharp downward revision to December looks certain to pull down what had been outstanding strength for consumer spending in fourth-quarter GDP. Retail sales fell 0.3 percent in January compared to Econoday's low estimate for no change. December is revised down 4 tenths to unchanged with November, adding insult to injury, also revised down, 1 tenth lower to what is still an outstanding gain of 0.8 percent.

All three months show declines for the leading component which is motor vehicles, falling a very sharp 1.3 percent in January. The weakness here no doubt is the result of replacement demand following the hurricane season which pulled sales forward. Building materials are also weak, down 2.4 percent and in this case possibly reflecting January's unusually severe weather. But however bad the weather was it didn't help nonstore retailers, a component that is dominated by e-commerce and which proved dead flat in January with December's initial surge of 1.2 percent revised down to a much more moderate looking 0.5 percent.

Clothing sales, which had been very soft, rose 1.2 percent in the month, echoing this morning's consumer price report where apparel prices posted a sudden jump. Restaurant sales, which had been strong, were unchanged while furniture sales wobbled for a second month, down 0.4 percent.

The downward revision to December turns what had been a solid holiday shopping season into a so-so season. Control group sales, which are a direct input into GDP, did rise a very strong 1.2 percent in November but are now down 0.2 percent for December with January limping in at no change. After today's report, the consumer sector gets a one-notch downgrade from strong to solid.

Hurricane Impact is Over

We have discussed hurricane impacts for quite some time, and it's not just about autos. Building materials down 2.4% is partially weather-related at best. Most of it was hurricane repairs that are now finished.

Econoday had been crowing about the need for an inventory build, citing strong demand. Poof. Those inventory-to-sales numbers won't look so lean going forward.

Advance Retail Sales

Let's turn our attention away from shoddy cheerleading to the Advance Monthly Retail Trade Report.

Shocking? No, this should have been expected.

These numbers will take a bite out of 4th quarter GDP as well as estimates for first quarter GDP.

Mike "Mish" Shedlock

Comments (11)
No. 1-11


I would expect that one reason for car & truck sales to decline is that they are lasting a lot longer than they used to. BTW the ads on this website are really slowing it down.


More tariffs today, this time on cast iron pipe products from China. Lumber, with imposed tariffs an Canada hit $500.00/thousand board foot... now double since the tariff was announced. Dollar falls more, short term treasury interest up, while long term treasuries fell today. Then today, the infrastructure package that Trump campaigned for is showing signs of defeat. Toll roads anybody?... I never expected anything different.


This infrastructure privatization will end up like the Chicago parking meter debacle.


That would make sense, if people still bought cars and trucks. Most people I know rent them through leasing. BTW: Get an adblocker. I haven't seen an ad in years! :)


The stimulus (tax cuts, deregulation, QE, low interest rates, infrastructure spending, etc) are pushing on a string. The economy can’t grow much faster than 2%, given all the constraints (lack of wage growth, only modest job growth, lack of skilled labour, restrictive trade policies, high debt levels, low savings rate, etc). Retail sales will not save the day and contribute much to gdp growth. Every day we hear about more tariffs, reciprocal taxes, and trade bullying. This will not help growth either.